Cisco boosts profit while cutting costs

Cisco Systems posted year-over-year gains in revenue and profit for its fiscal second quarter, reporting net sales up 10.8 percent to $11.5 billion, and said it met a key cost-cutting goal one quarter early.

Stephen Lawson
February 9, 2012

IDG News Service

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Cisco Systems posted year-over-year gains in revenue and profit for its fiscal second quarter, reporting net sales up 10.8 percent to $11.5 billion, and said it met a key cost-cutting goal one quarter early.

Cisco earned $0.40 per share according to generally accepted accounting principles (GAAP), up more than 48 percent from the second quarter of 2011. Its non-GAAP profit was $0.47 per share, beating the estimate of $0.43 from analysts surveyed by Thomson Financial. The analysts had forecast sales of $11.23 billion.

Wednesday's report covered the second quarter of the company's three-year plan to improve profits, which was laid out at its 2011 financial analyst conference in September. Cisco kicked off the effort after slumping results triggered a 150-day reorganization last year. Among other changes, a company structure based on a set of councils was replaced with a more traditional organization.

Cisco slowed down its usually aggressive acquisition activity during the slump but is now back in the game, Chambers said. The company's ideal buyout target remains the same as before, he said: a company with about 100 engineers and a product about to come to market. It especially likes companies when Cisco's customers recommend the acquisition.

The company's UCS (Unified Computing System) server lineup grew significantly in the second quarter, with revenue up 91 percent from a year earlier and an accumulated customer count of 10,763.

With both these servers and the Nexus line of switches, Cisco expects to gain ground in data centers because of virtualisation and cloud strategies, Chambers said. The line will blur between servers, networks and storage, which Cisco is addressing through its partnership with EMC and VMware, Chambers said. Overall data-center revenue was up 88 percent.

Routing and switching revenue also grew, though each by only 8 percent. Revenue from service-provider video infrastructure, another key focus at Cisco, grew 23 percent.